Local online advertising is enjoying a strong 2005, with many site operators reporting revenue increases of over 50%, and expecting the medium to continue growth over the next four years.
According to a recent report from media research group, Borrell Associates, local businesses will spend $4.1 billion this year on online advertising, a rise of 51.5% year on year.
Borrell projects the advertising channel to increase its revenues to $8.6 billion over the next five years, with local online adspend representing just under 6% of local adspend, up from the current 3.1%.
Although 2006 is not expected to see as robust growth as 2005, local online advertising is expected to reach $5.7 million for the year, a growth of 39.3% compared to this time last year.
Paid search, however, is forecast to rocket over the next four years, almost tripling and climbing to a predicted $907 million next year from $347 million this year.
By 2010, Borrell predicts spending on local search will reach $4.07 billion, accounting for 12% of the forecast $34.81 billion online advertising market for that year, while local display adverts will total just $4.54 billion.
However, this shift is likely to surprise many online publishers, with Gordon Borrell, Borrell Associate’s president saying: “Local banner ads and local listings will start declining to the point that paid search will roughly match it over the next five years. That’s going to catch a lot of newspaper and TV website operators off guard.”
According to Borrell’s 2006 Outlook newspapers currently hold the largest share of the market at 41% of local media spend, with internet companies such as Google and Yahoo! accounting for 32% while directories are responsible for 20%.
Analyst eMarketer confirms paid search’s predicted growth, estimating the advertising channel to grow in the US by 40% over the year to $5.4 billion, up from previous estimates of $4.7 billion (see Online Adspend To Hit $13 Billion In 2005).
These forecasts are echoed in the Australian advertising market, with Frost & Sullivan claiming the paid search market will total 130 million Australian dollars this year, up from A$70 million in 2004 and reaching A$350 by 2009 (see Paid Search Fastest Growing Online Area In Australia).
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